slovenia
Slovenia’s Prime Minister, Alenka Bratušek, has struggled
almost daily to convince international markets, her
country’s European partners, the international media and
her compatriots that Slovenia is not Cyprus.
The big unknown
around asset sales
isn’t how much money
the country would
raise but whether the
political will exists to
go through with it,
and quickly
Public finances
At the same time, the country’s public finances relative to other
peripheral countries look much better. That does not mean they
are in good shape or that they are not going to worsen. On the contrary. The public deficit fell from 6.4% of GDP in 2011 (including
0.14% of capital support operations in loss-making state-owned enterprises) to 4.4% of GDP in 2012. Consolidation started in 2012,
with a package of measures including a nominal wage cut in the
public sector and reinforced restraint in social transfers. The deficitincreasing capital support operation to the largest bank amounted to
some 0.25% of GDP.
The European Commission’s 2013 deficit projection of 5.1% of
GDP incorporates the full-year impacts of the May 2012 savings
package, the approved 2013 budget and the conversion of a hybrid
debt-equity instrument of the largest bank into equity. This conversion increases the deficit by 0.9% of GDP. The budget introduces a
cut in the wage bill and integrates the effects of the December 2012
pension reform. A marked recovery in capital expenditure is projected from increased absorption of EU funds in 2013. A variety of
budgeted discretionary tax measures is net-revenue increasing.
Government debt stood at 54% of GDP at the end of 2012,
compared with 90% in Cyprus. Slovenian government debt, however, has risen sharply from 22% of GDP at the end of 2008 and
is on course to reach 62% this year and as much as 80% by 2015 if
the renewed recession proves deeper and longer than expected. The
OECD has warned that the debt level, fuelled by the cost of saving
Slovenia’s banks plus healthcare, pension, and other costs, could
reach 100% by 2015 if the country does not embrace reform.
Up and down
Until recently, Slovenian debt yields had been climbing since March
following the Cypriot bailout/bail-in. It’s true that recapitalisation
would push up the Slovenian budget deficit and the government
also holds big stakes in the country’s three largest banks – which
means that wiping out their equity would also increase the deficit.
On Wednesday 17 April, though, Slovenia managed to sell
€1.1 billion in 18-month bills, more than twice as much raised as
expected, and then used €885 million to pay off some of its debt
coming due in June. Yields on Slovenian bills and bonds fell slightly
52 Gold the international investment, finance & professional services magazine of cyprus
but the bids, as X